Public investment in R&D and extension and productivity in Australian broadacre agriculture

This paper uses time-series data to examine the relationship between public research and development (R&D) and extension investment and productivity growth in Australian broadacre agriculture. The results show that public R&D investment has significantly promoted productivity growth in Australia’s broadacre sector over the past five decades (1953 to 2007). Moreover, the relative contributions of domestic and foreign R&D have been roughly equal, accounting for an estimated 0.6 per cent and 0.63 per cent of annual total factor productivity (TFP) growth in the broadacre sector, respectively. The elasticity of TFP to knowledge stocks of research (both domestic and foreign) and extension were estimated to be around 0.20–0.24 and 0.07–0.15, respectively. The ranges reflect the alternative distributions of benefits flowing from knowledge stocks that were assumed in the analysis. The elasticities translated into internal rates of return (IRRs) of around 15.4–38.2 per cent and 32.6–57.1 per cent a year for research and extension, respectively. While such rates are less than the average IRR of around 100 per cent reported in the international literature, they are consistent with previous estimates for Australian agriculture in the order of 15–40 per cent.